Why branding matters more for digital startups (not less)

April 2018

Of all the digital success stories of the last 20 years, Amazon tends to live in the shadow of its more illustrious cousins, Google, Facebook and Apple.

But for many people Amazon is still very much a poster child for how to be a disruptive, online business. The Amazon story is clearly one of online growth and wild success. But in recent years that success has started to slow down.

Despite all the dire predictions of the death of the high street, Amazon faces the same challenges as any other business. Jim Sterne, author of Artificial Intelligence for Marketing said “I don’t go shopping on Amazon, that’s a terrible experience. I go to Oxford Street. But when I want to buy something – Amazon says you’ll have it tomorrow.”

So what we see here is a classic case of core competence. Amazon can do some stuff well, but not other stuff. To grow they need to move into other areas. Amazon knows this, and has moved from a simple online store towards a hybrid “clicks and bricks” model as they try to gain a foothold on the high street and beyond.

But perhaps more notably, the company has started to spend a lot of money on building its brand. In fact, the company spent the vast majority of its marketing budget last year on TV advertising, including a highly memorable Superbowl ad. [Edit: This trend continuus to this day. In the US, Amazon increased its Christmas TV adspend by 290 percent from the same period in 2017.]

But why?

The answer comes from new research by Les Binet and Peter Field. What Les and Peter have discovered is that products and services that sell online, (such as brands that are heavily researched or brands that rely on search) need to encourage people to search for their brand specifically.

For example, if you’re an airline called Liftoff Airways, you don’t want people to search for “cheap flights to Malaga,” you want them to search for “Liftoff Airways Malaga.” So paradoxically, the kind of brands that people actively seek online actually need more brand building and not less.

As Binet himself says, “brands that sell or reach online need a higher percentage of their spend going to brand building because they already have direct channels to conversion.”

Another example of his theory in action is the success and challenges of Dollar Shave Club. Like Amazon, the theory goes that this brand is one of a new generation of web native businesses that have disrupted old industries. To some extent that is true. But the way they’re doing it is as old as the hills.

In 2013, only one a year after its 2012 launch, Dollar Shave Club was already spending $3 million a year on TV ads. Fast forward to 2018, and no other razor brand spends more on TV than Dollar Shave Club. Over the last 12 months, their ad spend clocked in at a cool $20.7 million.

Go short and go long, go big and go small, go targeted and go mass

Clearly, digital marketing and online commerce platforms have given us an explosion of bright, exciting new brands and great business stories. But because of advances of marketing research, we now also know that programmatic, digital targeting and online commerce platforms aren’t the whole picture.

That’s because building a brand is a long game. Don’t get me wrong, it’s a no-brainer to invest 25-40% of your budget in short-term marketing tools. That’s perfect. But we now know that you need to think about the long term too. Which is why you need to invest around 60-75% of your budget in long term, emotional, creative brand building efforts.

For that you’re going to need to build your brand. To do that, you’re going to need to invest in things like newsmedia, TV, radio, outdoor and print. More importantly, that long term stuff isn’t about sales messages or targeting. It’s about big, creative messages that get your brand talked about. It’s about generating future value and future customers.